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March 2018

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Textile and garment associations of Pakistan have threatened to launch a nationwide protest if the levy of two percent sales tax and five percent withholding tax on raw material imports is not rolled back.

The representatives of these associations asked the Government to rollback the levy announced through SRO 154(I)/2013 dated February 28, 2013, failing which all industries of the five sectors would be forced to launch protest.

They said they fail to understand as to why the Federal Bureau of Revenue (FBR) has taken such a decision which would badly hit the five sectors, which hold to be major employment and foreign exchange generators for the country.

During their meeting with officials of the FBR last week, the FBR officials agreed to reduce sales tax on the five sectors to one percent, but just a couple of days later FBR declined to fulfil the commitment, the representatives said.

They added that the FBR rejected their demand to amend SRO 1125(I)/2011 dated December 31, 2011, to exempt the registered members of the five sectors from sales tax, and levy a two percent tax on unregistered persons.

The FBR is holding back sales tax, customs rebate and drawback of local taxes and levies (DLTL) claims estimated to be around Pk Rs. 60 billion, and the delay in releasing of these refund claims has also raised the difficulties of the export industry, they said.

This has led to biggest ever liquidity crisis, while other factors like high cost of doing business, worst-ever loadshedding, and high tariff utility rates continue to trouble the producers and exporters of the five sectors, and has highly impacted their ability to contribute to the country’s export growth, the representatives said.